What is the significance of Form 8332 in claiming a child as a dependent?

Form 8332 is significant because it allows the custodial parent to effectively transfer the tax exemption for a child to the noncustodial parent. In situations where parents are separated or divorced, the custodial parent—the one with whom the child lives for the greater part of the year—may choose to relinquish their right to claim the child as a dependent. By completing Form 8332, the custodial parent grants permission for the noncustodial parent to claim the child on their tax return, which can be beneficial for the noncustodial parent as it may lead to potential tax benefits, such as the child tax credit or the earned income credit, depending on their situation. This form must be attached to the noncustodial parent's tax return when claiming the child to validate the claim.